Four Common Mortgage Misconceptions
Every so often, we like to let everyone know the biggest misconceptions people have about mortgages. It’s important to know these things because if you think something is true and it’s not, it might prevent you from buying a house or refinancing your current mortgage. Both of those things could cost you a lot of money in the long run.
Here’s what you need to know about four common mortgage misconceptions.
Down Payment Requirements
Almost everyone is confused when it comes to how much money you need for a down payment. The common belief is that you need 20% of the purchase price as a down payment, but that is not true. For a conventional loan (a non-government loan), you need either 3% or 5% down, depending on the type of loan. On an FHA loan, you need 3.5% down. For a VA loan (for active military or veterans), you don’t need any money down. In addition, there are down payment assistance loans available for both conventional and FHA loans that will cover your entire down payment.
Many people believe they need to have the same job for 2 years before they can qualify for a mortgage, but that is not true. The requirement is that you must have been employed for 2 years sometime in your life. Even if you have been unemployed for years, if you are currently working, and sometime in the past, you have had 2 years of employment, you could qualify for a mortgage. Of course, there are different rules depending on your particular situation, but it is certainly not necessary to have the same job for the past 2 years.
Only a Fool Would Pay Mortgage Insurance
Mortgage insurance, often referred to as PMI, is an insurance policy that you need to pay for if you don’t have 20% down. Before mortgage insurance existed, everyone needed at least 20% down. If you have less than 20% down, mortgage insurance is the thing that allows you to become a homeowner. It helps you buy a house, and does not punish you.
FHA and VA Loans are Harder to Get Approved
Many real estate agents believe that FHA and VA loans are harder to get approved by underwriting, but that is not true. This myth is perpetuated by lenders who are not approved by the government to sell FHA and VA loans. They can’t sell them, so they tell you to stay away from them. Some long-time real estate agents believe that the appraisals for FHA and VA loans are more restrictive, but that is not true, either. They were years ago, but not any more.
There are countless other misconceptions about mortgages. If you would like to have the right information, contact us. We’re always happy to answer your questions and get you a mortgage that will make your life easier.